SAN DIEGO — Sunday's afternoon session here at the 2015 NAPA 401(k) Summit could have carried a much easier title: "Retirement planning for retirement planners."
We've all heard the saws: "The cobbler's children have no shoes; the web designer's homepage is never done and the journalist never writes back."
Well, maybe I made that last one up.
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But it sounds simple enough, right? Your passion becomes your own business — in this case, helping employers and employees plan for retirement.
But when was the last time you wondered: "How do you get out of your practice?"
Or as moderator Chad Gutner, advisor/partner with Samuel Financial put it, "How do you smoothly transition your business to a new owner at maximum value to you?"
Before answering, it's worth pointing out that, according to panelist David Grau Sr., president and founder of FP Transitions, only about 8 percent of advisors actually manage to sell their business. Among the other 92 percent, "attrition is the No. 1 exit plan."
So, let me get this straight: We're talking about a professional service industry whose sole mission, as its most fundamental, is to plan for the future. Period. And more of 90 percent of the businesses run by said individuals fall by wayside? I'm sorry, but that's not a very ringing endorsement of your talents.
Keep in mind, as panelist Grau pointed out during his impassioned presentation, that we're talking about an industry with a "higher sustainable growth rate — 10 percent — than any other professional service model. You have predictable income. And you have low, predictable expenses — a third less than either a doctor or a CPA."
The short, simple answer to managing your own practice transition, though, according to Grau, is first about turning your practice into more than just a job. Advisors need to focus on turning it into an enduring business model.
Innovation is about more than building a lasting business. It's about prepping that business for the next generation. And the one after that. It's a responsibility you have not only to yourself, but to your loved ones, your employees and, of course, your clients.
"Build something that is designed to outlive you," Grau concluded, "without making you obsolete."
His solution is maddeningly simple: Slowly transfer stock (or units) of ownership of your business to the next generation of owners while scaling back your own involvement. This not only assures your successors of skin in the game, but provides the founding advisors with another reliable revenue stream.
"Not everyone necessarily needs a succession plan," Grau explained, "but everyone needs a five-year plan."
It's that, or walk around barefoot. And probably broke.
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